Archive for category NEP

AUGUST 11 ― Malaysia’s ongoing currency crash has many causes: a worsening global outlook, plunging commodity prices and, of course, the political scandal enveloping Prime Minister Datuk Seri Najib Razak. But the real culprit is the year 1997.

The conventional wisdom is that Malaysia’s then-leader Tun Dr Mahathir Mohamad saved the country from the worst ravages of the Asian financial crisis when he imposed capital controls, pegged the ringgit and waged verbal war against speculators. It’s true that Malaysia avoided much of the chaos that toppled economies in Indonesia, South Korea and Thailand. But events today show why, 18 years later, Malaysia may wind up the biggest loser in the region.

Malaysia’s neighbours recovered by improving transparency, strengthening their financial systems, and limiting collusion between public and private sectors. Such urgency never swept Malaysia, where the ruling coalition has held power for almost six decades.

Improvements in Malaysian corporate governance have been slow and uneven. Hopes for an end to 46 years of affirmative action ― which benefits the Malay majority while sapping productivity and repelling foreign investors ― have been for naught. Efforts to weed out corruption and ween the economy off energy exports have been tepid. Read the rest of this entry »

In 1971, more than forty years before the world would turn its attention to the top 1% and the problem of income inequality, Malaysia embarked on one of history’s boldest and most noble of experiments to reduce social disparity. Malaysia’s New Economic Policy or NEP would seek to “eradicate poverty for all” and “eliminate identification of race by economic function and geographic location”. This polity was setting out to solve the massive problem of injustice and inequality that other societies much more mature continued to struggle with.

Malaysia was a democracy that hewed the rule of law. The NEP would be Malaysia’s key political driver. Over the decades that followed, the NEP’s mantra would serve as backdrop to almost all political discourse in the country. NEP-themed policies would, among much else, flesh out the concept of Bumiputera – an ethnic-driven formulation of native peoples in Malaysia.

It is difficult to grow an economy – look at train wrecks strewn around the world. But seeking to do so and at the same reduce ethnic- and rural-urban inequality, and maintain social harmony among diverse ethnic and religious groups is an order of magnitude more arduous. Malaysia succeeded: Its income is now well above world emerging-economy average, and its urban infrastructure and worker skills approach those in the first world. Malaysia’s top bankers, business people, and entrepreneurs are admired everywhere. NEP reduced pockets of extreme poverty and created a significant, thriving, and successful Bumiputera middle class – a group of professionals and intellectuals whose contributions to Malaysian society would be the pride of any country.

And, although from time to time patchily diverging from the ideal, throughout this history Malaysia worked hard to maintain its young democracy and its adherence to rule of law, and to support a healthy vigorous open sphere of public debate. Sensitive racial questions were out of bounds, but open questioning of the government was lively. Top government officials routinely had the judiciary rule against them. And a national identity emerged, one that combined the best aspects of local culture and an easy-going open-minded cosmopolitanism developed from, among other things, the many Malaysians who have seen significant international experience. More so than even when within, Malaysians outside Malaysia saw each other for the warm and lively friends they genuinely were, people who felt driven by a mission to make their country better.

Since his 2009 swearing-in, Malaysia’s current prime minister has sought to articulate an international vision for a ‘coalition of moderates’. As leader of a successful moderate Muslim country, he carried an authority and credibility sorely needed in global discourse. He was widely accepted in international circles, and even famously golfed with Barack Obama.

John F. Kennedy’s 1961 vision of putting a man on the moon energised the United States to “catch up to and overtake” the Soviet Union in technological prowess. The Soviets humiliated the US by being the first to put a human in space. Kennedy’s vision spurred the US into action to achieve technological domination.

Tun Abdul Razak’s 1971 vision, in the New Economic Policy similarly energised Malaysia. Razak wanted to eliminate poverty and to eliminate the association of occupation (and income) with race. Razak’s vision spurred the nation to recognise and reverse the effects of race-based choices with inequality-reducing choices.

The NEP reduced the income inequality between the Malay and Chinese communities. It succeeded so well that at the end of the NEP in 1991, the government decided to stop reporting figures for the Malay community. The data was hidden because the government lacked political will to end handouts which increased income inequality.

To avoid making the hard political choice of ending benevolence to rich Malays the government combined “other Bumiputera” with Malays and reported only figures for Bumiputera, Chinese, Indians and Others in national reports. Energising vision gave way to superficial vision. Read the rest of this entry »

The man who helped Malaysia’s second prime minister Tun Abdul Razak Hussein craft the New Economic Policy (NEP) to eradicate poverty and end identification of occupation with race laments that it has now become distorted by race and religion.

Tan Sri Ramon Navaratnam, who was the deputy head of the Economic Division in the Treasury under Razak’s administration, said the NEP was “a wonderful, noble policy”.

“He (Razak) was serious about eradication of poverty regardless of race. Every poor chap, regardless of his ethnicity, was given help.

“Not today, I am afraid. Along the way, it got distorted as race and religion got in the way,” Ramon told The Malaysian Insider in an interview to conclude a series commemorating Razak’s 39th death anniversary. Read the rest of this entry »

A close confidante of Malaysia’s second prime minister, Tun Abdul Razak Hussein, has rated the country’s controversial affirmative action-based economic policy created by his boss as both a “great success and great failure”, 45 years after it was first implemented.

Tan Sri Abdullah Ahmad, who was Razak’s political secretary, said the New Economic Policy (NEP) had done well to lift the Malays out of poverty and increase the number of Malay professionals in all sectors.

But it has failed in its other objective of eradicating poverty regardless of race, Abdullah, better known as Dollah Kok Lanas, told The Malaysian Insider in an interview as part of a series to commemorate the 39th death anniversary of Razak who died on January 14, 1976.

Abdullah also noted what economists have been telling Putrajaya in recent times, that wealth inequality is no longer between races, but within each race, and in the case of the Malays, concentrated within an elite class.

“Some might argue that the enlarged national economy is indeed being shared across the three main races of the Malaysian society, but (this is) among the 1% or less. I have sympathy with this view.Read the rest of this entry »

To commemorate the 39th death anniversary of Malaysia’s second prime minister and “Father of Development” Tun Abdul Razak, The Malaysian Insider is running a series of interviews with his colleagues and close associates who, with Razak, steered Malaysia through the early days of rebuilding following the race riots of May 13, 1969.

Earlier today, we heard from four of Razak’s sons on his legacy and their personal memories of their father.

In this article, former deputy prime minister Tun Musa Hitam speaks about Razak’s leadership style and of his experience working with the man who brought him back to Umno after his expulsion. Musa had been expelled from Umno after the race riots over a fall-out with the then prime minister and Umno president, Tunku Abdul Rahman.

Readmitted to the party by Razak, Musa went on to rise in Umno and also held the post of Minister of Primary Industries in Razak’s cabinet.

Despite the political tension surrounding Tunku’s departure and Razak’s ascension as prime minister, Musa remembers his mentor for his gentleness, patience and consultative approach, coupled with his firmness to see a decision through once it was made. These were values, Musa says, that Razak knew were needed to manage a multireligious and multiracial country like Malaysia.

TMI: What kind of person was Tun Razak to you? As a leader, a friend or a colleague?

Musa: Tun Razak was a national leader in the true sense of the word. He had vision and perception. He understood the priorities of our country on attaining independence. The long term interest of the nation, to him, was a united Malaysian nation based on the principle of unity within diversity. Read the rest of this entry »

OUTSPOKEN: The above was taken from part two of an article by Tanner Colby which discussed the affirmative action in the US to uplift the minority communities that had been marginalised, especially the African-Americans.

He did a study on this and wrote a book about the history of the colour line and the effort to erase it. He came to this final conclusion, “Affirmative action offered the illusion of reparative justice wrapped up in the rhetoric of empowerment, but its net result was to absorb and neutralise black demands for equality, not fulfill them.”

Quotas were imposed on college admissions and also on employment. This brought about corruption in the system.

Another American researcher and author, Thomas Sowell, an African-American, came to this conclusion:

• Encourage non- preferred groups to re-designate themselves as members of preferred groups to take advantage of group preference policies

• Tends to benefit primarily the most fortunate (eg Black millionaires), often to the detriment of the least fortunate among the non-preferred groups (eg poor whites)

• Reduced the incentives of both the preferred and the non-preferred to perform at their best – the former because doing so is unnecessary and the latter because it can prove futile – resulting in net losses for society.

He concludes: “Despite sweeping claims made for affirmative action programmes, an examination of their actual consequences makes it hard to support those claims, or even to say that these programmes have been beneficial on net balance.” Read the rest of this entry »

COMMENT At the initial stage of the New Economic Policy, privatised entity and government-linked companies (GLCs) were almost non-existent.

Khazanah Nasional Berhad, the main institution through which the federal government controls GLCs, only came into existence in 1993. Therefore, before 1990, the exclusion of government shareholding owned by Khazanah was a non-issue.

But, when the privatisation policy was vigorously implemented after the publication of the ‘Privatisation Master Plan’ in 1991, the exclusion of government shareholding in privatised entities and GLCs had a significant distorting effect on equity ownership by ethnic group.

Musa Hitam, in an exclusive interview in August 2014 with the Malaysian Insider said, “But the government does not take GLCs into account when they point out that the present bumiputera equity ownership is 24 percent. We are deluding ourselves by continuously pointing a finger at the Chinese.” As a former deputy prime minister and chairperson of a GLC, Musa definitely knew what he was talking about.

For the purpose of showing bumiputera equity ownership, government data are divided into three categories of bumiputera, namely:

COMMENT At the outset, we wish to make it abundantly clear that we fully support the New Economic Policy (NEP) objective of eradicating poverty irrespective of race and we completely agree with the 30 percent bumiputera equity ownership target.

In a multiracial country, social engineering using affirmative action to uplift the economic status of a lagging community is necessary. We do not doubt the noble intention of the founding fathers of NEP and we believe the objectives can be achieved if right policies are formulated and implemented.

Government in any part of the world is usually quick to claim credit for any success. However, in the case of Malaysia, with regard to the achievement of 30 percent bumiputera equity ownership target, the government seemed to be more inclined to declare “failure”.Read the rest of this entry »

We refer to statements by the Governor of Bank Negara (BNM), Tan Sri Dr Zeti Akhtar Aziz, reported on various print media on November 28, 2014, on portions of the Malaysia Human Development Report (MHDR).

She disputes our finding that over 90% of Malaysians have no savings, claiming that the analysis is “partial” and “misleading”.

We thank Tan Sri Dr Zeti Akhtar Aziz for engaging with the MHDR, and for providing this opening to reaffirm our findings. Allow us to clarify the points raised by Tan Sri Zeti. Read the rest of this entry »

Whether poverty has declined in Malaysia depends on how it is measured. An example is Putrajaya’s reliance on absolute poverty figures, which according to a United Nations report, results in data that does not reflect reality.

The Malaysia Human Development Report 2013 commissioned by the United Nations Development Programme (UNDP) instead says poverty is better measured against what households earn in general, rather than by a fixed minimum level.

The report measures relative poverty, which sets the threshold at half the national median income, and finds the number of Malaysians in this category has been rising since 2007, with one in five households considered relatively poor.

Absolute poverty, on the other hand, is a measurement based on the declared poverty line. In Peninsular Malaysia, this is fixed at RM763, RM912 in Sarawak and RM1,048 in Sabah.

But the relative poverty line in 2012 was RM1,813, or half of the household median income of RM3,626.

The report, released last week and prepared by Malaysian researchers, notes that in 2007, 17.4% of Malaysians were in relative poverty, and this increased to 19.3% in 2009 and 20% in 2012.

The figures fly in the face of Putrajaya’s claim to have successfully reduced absolute poverty to 1.7% in 2012, from 49.3% in 1970. Read the rest of this entry »

Malaysia’s affirmative action policies in the past 40 years have created a culture of dependency, corruption and racial envy, a prominent Malaysian economist said today.

‎Tan Sri Dr Kamal Salih, an adjunct professor of Economics and Development Studies at Universiti Malaya (UM) said that the‎ benefits of the development policies did not truly extend beyond the first 20 years of the New Economic Policy’s (NEP) implementation.

“The problem over the decades involved has not been with the intent nor the content of the NEP and its successors, but the manner of their implementation, which have produced new inequalities, poverty and vulnerabilities in the development process.

“While no further progress has been made in reducing inequality in income distribution over the last decade, the NEP had resulted instead in creating a culture of dependency, corruption and racial envy.” Read the rest of this entry »

Malaysians were informed on July 10, 2014 that a major bank consolidation was in the pipeline, involving CIMB Group Holdings, RHB Capital and Malaysian Building Society. With this union, CIMB will emerge as Malaysia’s largest banking enterprise, in terms of assets, as RHB Capital owns RHB Bank, currently the country’s fourth largest bank.

According to media reports, the merger will enhance CIMB’s goal of becoming Southeast Asia’s leading Islamic finance institution with the capacity to expand its interests in this sector to other parts of the world. However, one core issue remains unmentioned in the press: this consolidation will tightly entwine the interests of political and business elites in the banking sector. Read the rest of this entry »

In the first part of my article on subsidies for the poor or the rich such as Umno-Putras, I drew attention to the subsidy cut on gas that has come into effect and analysed its impact on poor- and middle-class households.

In this second part, I shall look at the area of subsidies for the cronies of the political elite which run the country – subsidies which are beneath the radar, unaccountable, undeserved and which have been partly responsible for the financial mess that the country is now facing.

What should be in front line of subsidy cuts

What should comprise the first, second or third rung of subsidy cuts to balance the national budget should be open to national debate. Read the rest of this entry »

Do Malays need more crutches or “tongkat” to succeed in business? During the past week we have had three different explanations provided by Malay leaders that have made the news.

Tun Daim Zainuddin’s explanation

The first is by Tun Daim Zainuddin, the former finance minister and close ally of Tun Dr Mahathir Mohamad, who argued that the lack of talented Malay entrepreneurs is due to the policies of Datuk Seri Anwar Ibrahim when the latter was the finance minister. Read the rest of this entry »

KUALA LUMPUR, June 6 — Universiti Teknologi MARA (UiTM) and those who fashion themselves “defenders of the Malay race” can be true heroes by working to end the country’s socio-economic ills and not in attacking the DAP or Dyana Sofya Mohd Daud, Datuk Zaid Ibrahim said.

The former de facto law minister took to his blog yesterday to defend the largely-Chinese party and its rising Malay star, observing the vitriol released by UiTM lecturers, administrators and other graduates during the 12-day campaigning for the May 31 May Teluk Intan polls that ended with the DAP’s loss to Barisan Nasional (BN).

“Perhaps they think this enhances their profiles and makes them suitable for promotion and contract extensions because they are ‘champions of the Malays’, but they are actually doing a disservice to academia generally,” wrote Zaid.

An alumnus of the university, the one-time de facto law minister noted the savagery of the attacks against Dyana, the DAP’s 26-year-old candidate in the Perak by-election and against her party, and said the display showed a marked departure from the original aim of UiTM’s promoters, which he said was to help the Bumiputera become world-class professionals.

The “racial indoctrination” at the Bumiputera-preferential university had gone overboard, he said, adding that the campaign of hate-painting the DAP as anti-Malay and Dyana as a “traitor” to her own race for aligning herself with a Chinese-majority party “made no sense” and was hurting UiTM’s reputation as an academic institution as well. Read the rest of this entry »

MAY 29 — It seems that nothing can stop Dyana Sofya’s meteoric rise. The cynic could cast aspersions that she is merely a DAP token. After all, the DAP is a predominantly Chinese party which has been trying to shake off this description.

The DAP needs to widen its support base in order to hold real power and not rely on the atavistic PAS or the fractious PKR. Dyana is Malay, young and from the affirmative action university, UiTM. It all fits the bill for the cosmetic change that DAP appears to desire.

But look deeper and one can see that Dyana’s story is something that most post-NEP Malaysians can relate to and identify with. And that makes her worth more tokens than one can spend at Genting. Read the rest of this entry »

Comparing the tone in Teluk Intan with Indonesia’s recent presidential election, the former Cabinet minister noted that campaigning in the neighbouring country remained civil despite the much higher stakes.

In the minor Malaysian by-election, however, Zaid pointed out that Dyana Sofya has come in for all manner of personal attacks from rival Umno, who have labelled her a traitor to the party, a sell-out to her people, and a puppet of the DAP, among others.

“To put it simply, Indonesia has progressed in many ways in their quest to build a nation with values all Indonesians share as a people — but in Malaysia, the Malays seem to be going backwards.

“Perhaps the great success of the New Economic Policy (NEP) has somehow made Malays ‘different’,” Zaid wrote on his blog yesterday. Read the rest of this entry »

Swatting aside Tun Dr Mahathir Mohamed’s claims of Chinese dominion over the country’s wealth and Indian command of its professions to justify pro-Bumiputera affirmative action, Kluang MP Liew Chin Tong argued that GLCs masked the community’s true control on the economy.

“Look at most of the private hospitals, any of the big ones you can name. Take Subang Jaya Medical Centre, that is owned by Sime Darby,” he said, referring to the now renamed Sime Darby Medical Centre.

“Prince Court, which is the country’s most expensive hospital, is owned by Petronas. Pantai hospital and Gleneagles are owned by Kazanah through its subsidiaries.

Sime Darby and Petronas are both state-owned corporations while Khazanah Nasional is state asset manager; these and other GLC’s come under the control of the government headed by Malay nationalist party Umno.

A steadily growing force since the Mahathir administration, GLCs such as Khazanah Nasional, Sime Darby and DRB-Hicom have amassed overflowing war chests and built networks that far surpass that which smaller firms and start-ups can muster.

Putrajaya estimates that firms linked to it employ around 5 per cent of the national workforce, and hold 36 per cent market capitalisation of Bursa Malaysia and 54 per cent of the Kuala Lumpur Composite Index (KLCI) respectively. Read the rest of this entry »

KUALA LUMPUR, April 4 — “Haywire” implementation of the New Economic Policy (NEP) was the cause of the rampant cronyism and rent-seeking now ailing Malaysia, said veteran lawmaker Tengku Razaleigh Hamzah.

The former finance minister said the practice of patronage in implementing the policy had undermined the “just and noble” philosophy that underpinned the social engineering programme that was mooted in the aftermath of the May 13, 1969 racial riots.

“The entrenchment of rent-seeking and patronage system into the fabric of Malaysian life begs the question: How did this come to pass?” he said in his keynote address at the launch of the book “Rich Malaysia, Poor Malaysians” last night.

“Much as this sounds like a blame game and much as this is distasteful to swallow, the answer lies in the New Economic Policy; or rather, the NEP that had gone wrong in its implementation,” he added.

Tengku Razaleigh, or Ku Li as he is popularly known, said the country has fallen victim to the machinations of politicians habitually lining their own pockets and colluding with businessmen who were uncompetitive without preferential treatment. Read the rest of this entry »